A. Compute the degree of operating leverage: B. Compute the degree of financial leverage:

C. Compute the degree of combined leverage:

D. Compute the break-even point in units:

The Sterling Tire Companys income statement for 20X1 is as follows:

STERLING TIRE COMPANY
Income Statement
For the Year Ended December 31, 20X1
Sales (40,000 tires at $100 each)	$	4,000,000
Variable costs (40,000 tires at $50)		2,000,000
Fixed costs		600,000
Earnings before interest and taxes (EBIT)	$	1,400,000
Interest expense		60,000
Earnings before taxes (EBT)	$	1,340,000
Income tax expense (25%)		335,000
Earnings after taxes (EAT)	$	1,005,000